Treasuries Extend Fall on Positive Economic Data, Stocks Rally

(Bond Market Recap for August 16th, 2012) Treasuries dropped, pushing yields on 30-year bonds to the highest level since May as weekly jobless claims and housing starts boosted the argument that the Fed is unlikely to announce further quantitative easing in September.

Treasuries retreated further as safe haven demand dwindled on improved risk sentiments, with the benchmark 10-year yield rising two basis points, or 0.02 percentage points, to 1.84 percent after a govt. report suggested building permits in July hit the highest since August 2008. Yield on 30-year treasury bonds jumped four basis points to 2.96 percent in late afternoon trade, New York time.

10 Year Treasury Yield – 1 Month Chart

Bond funds were down on the day with the iShares Barclays 20 Year Treasury Bond ETF (TLT) dropping $1.04, or 0.85 percent, to $121.01, while the Vanguard Total Bond Market ETF (BND) shed 9 cents, or 0.11 percent $84.09.

TLT 1 Month Chart

US stocks surged Thursday with the S&P 500 rallying to its highest level since April as robust tech sector and housing data offset disappointing regional manufacturing data. Stocks got additional support after German Chancellor Angela Merkel said Europe’s largest economy remains committed to the single currency during a trip to Canada. Led by Cisco Systems (CSCO), the Dow Jones Industrial Average (DJIA) jumped 85.33 points, or 0.7 percent, to 13,250.11. The network gear manufacturer soared 9.6 percent after releasing better-than-expected quarterly results in late Wednesday and unveiling plans to raise its quarterly dividend by 75 percent 23. Within the Dow, the breadth remained positive with 22 of the 30 components finishing higher. Other tech advancers included heavyweights Microsoft (MSFT), Intel (INTC), IBM (IBM) and Hewlett Packard (HPQ). Wal-Mart (WMT) was the biggest percentage decliner within the blue-chip index after it cut its full year earnings revenue forecast.

Dow Jones Industrial Average 1 Month Chart

The S&P 500 Index (SPX) added 9.98 points, or 0.7 percent, to 1415.51 with the tech sector advancing the most among its 10 business groups. The tech-heavy NASDAQ Composite (COMP) jumped 31.46 points, or 1 percent, to close at 3062.39 with shares of Electronic Arts (EA) vaulting 5.5 percent on buyout rumors.

Advancers outpaced decliners a little over 2-to-1 on the NYSE.

Oil prices for September delivery gained $1.27 to close at $95.60 a barrel.